Oil stocks remain lower at close

LisaSanders

DALLAS (CBS.MW) -- Oil and gas stocks retreated further at Tuesday's close as energy futures stumbled on easing supply concerns and on a report projecting that growth in oil demand would slow in 2005.

The International Energy Agency said it expects demand to grow next year by 2.2 percent, or 1.8 million barrels a day, in line with the global growth rate seen in 2003 but slower than this year's estimated pace. See report highlights.

On the New York Mercantile Exchange, crude for August delivery shed 6 cents to settle at $39.44 a barrel, while August unleaded gasoline lost 1.1 percent to settle at $1.2853 a gallon and August heating oil closed at $1.0617 a gallon, up 0.1 percent. See Futures Movers.

"We expect demand growth to moderate and supply concerns to ease in coming weeks," said Prabhas Panigrahi, managing director of research at Ehrenkrantz King Nussbaum, in a morning note. "As such, barring any fresh violence in the Middle East, we are forecasting ... prices to descend to around $35 a barrel this summer and to average below $30 a barrel in 2005."

Panigrahi also expects natural gas to range from $5.50 to $6 per million British thermal units over the next two years. Natural gas for August delivery ended at $5.905 per million British thermal units, up 0.8 percent on the Nymex.

"Although lower energy prices may further slow down the exploration and production spending by oil companies, thus lowering revenues and growth prospects for service companies, we believe selective opportunities exist in the sector," Panigrahi wrote.

In energy stock dealings, oil and gas equities were almost uniformly lower. The Philadelphia Oil Service Index
OSX, -1.06%
was off 0.7 percent to close at 106.79; the CBOE Oil Index
OIX, +2.22%
dropped 0.4 percent to close at 361.78; and the Amex Natural Gas Index
XNG, -0.91%
fell 0.6 percent to close at 247.28.

The Philadelphia Utility Index
UTY, -0.74%
rose 0.1 percent to end at 312.50.

In sector news, Royal Dutch/Shell Group said it restated first-quarter profits higher by $226 million, to $4.7 billion, to reflect a change in accounting principles for inventories. And as previously disclosed in regulatory filings, a restatement of 2003 financials reduced the company's annual net income by $203 million, the company added.

Shell has been under pressure since it unexpectedly reduced its proved reserves estimate by 20 percent in January.

U.S.-traded shares of Royal Dutch
RD
fell 55 cents to close at $51.78, and Shell Transport & Trading
SC, -1.83%
was off 49 cents to close at $44.71.

Also Tuesday, Duke Energy
DUK, -0.51%
said it would provide $207.5 million in cash and credits to settle litigation with several states and federal regulators.

As a result, the company will record a $104.9 million charge to second-quarter results, which includes $102.6 million in reserve and associated offsets. California, Washington and Oregon, as well as several utilities and federal regulators claimed that Duke received unjust or unreasonable rates for the sale of electricity during January 2000 to June 2001.

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